Reciprocity in Contract Law

• Jurisdiction: South Africa
• Author: Andrew Hutchison
• Date: 16 August 2019
• Citation: (2013) 24 Stell LR 3
• Pages: 3-30
• Published date: 16 August 2019

3

RECIPROCITY IN CONTRACT LAW

Andrew Hutchison

BA LLB LLM PhD

Senior Lecturer in the Department of Commercial Law, University of Cape Town*

1 Introduction

A central idea in contract law, around in some form since at least the time

of Aristotle (if not before) is the idea of commutative justice. One might

transpose th is to Latin and say that each is entitled to his quid pro quo under

a contract. In South African contract law we prefer to describe this concept

as the principle of “reciprocity”, while other legal systems might use instead

terms such as “mutuality” or “synallagma”. Most bilateral contracts will

involve an element of exchange between the parties, with one performance

being given in retu rn for another. In such a state of affairs, performa nce (or at

least the tender of performance) by one party becomes conditional upon the

right of the other party to receive counter-performance. Since performance

by one party is conditional upon performance by the other, this entails a

concomitant right to withhold performance should counter-performance not

be given or at least tendered. In t he words of Jansen JA:

“Die grondslag van hierdie verweer [the exceptio non adimpleti contractus] is die erkenning daarvan

dat by sommige kontrakte (wederkerige kontrakte) waaruit wedersydse verpligtinge voortvloei, daar

wesenlik ’n uitruiling van prestasies beoog word, met oa die gevolg dat die een party nie verplig is om

sy prestasie te verrig nie alvorens die ander op sy beurt sy teenprestasie verrig…Gerieikheidshalwe

sal voortaan in hierdie uitspraak van die ‘wederkerigheidsbeginsel’ gepraat word, terwyl die reg om ’n

prestasie as uitvloeisel daarvan terug te hou die ‘weerhoudingsreg’ genoem sal word…”1

The question, however, is when can obligations be said to be reciprocal?

Corbett J suggested in ESE Financial Services (Pty) Ltd v Cramer2 (“ESE

Financial Services”) that obligations were reciprocal when the performances

of both parties represented “concurrent conditions”, in other words where a

simultaneous exchange wa s envisaged.3 An example of this scenar io would be

the exchange of the merx for the purchase price u nder a cash sale.4 Al te rn at ive ly,

one performance might be the “condition precedent” for the other – such as

where an independent contractor must complete his work in full before the

* The author would l ike to express his than ks to his father, Professor Dal e Hutchison, to Professor Jaco

Barnard- Naudé and to the anony mous reviewers for the ir comments on a dr aft of this paper

1 BK Tooling (Edms) Bpk v Sco pe Precision Eng ineering (E dms) Bpk1979 1 SA 391 (A) 415H per Jansen JA:

“The basis of th is defence is the acknowledgem ent that with certai n contracts (reciprocal c ontracts)

from which reciprocal obligations flow, an exchange of performances is intended Amongst other

things, th is has the consequenc e that one party is not obli gated to tender his per formance unless t he

other perfor ms in return… For t he sake of convenience thi s will be termed th e ‘reciprocity princ iple’

from here on in t his judgment, while th e right to retain perfo rmance which flows f rom this, will be

termed the ‘r ight of retention’…” (own translation)

2 1973 2 SA 805 (C)

3 808H-809A

4 808A

(2013) 24 Stell LR 3

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employer is obliged to counter-perform.5 Whether performances under a

contract fall into either of these categories is thus a question of inter pretation

of the contract in question.6 I nterpretation would also determine t he sequence

of performance required.7

If reciprocity then refers to a state of affairs where the performance and

counter-performance of cont ractual obligations are conditionally lin ked, then

the concomitant right of such a par ty – as stated by Jansen JA in BK Tooling

(Edms) Bpk v Scope Precision Engine ering (Edms) Bpk (“BK To olin g”) above

– is to withhold performa nce should counter-performance not be forthcom ing.

This weerhoudingsreg (or right of retention) is a self-help mechanism in South

African contract law, which is given effect to by a defence with the historical

name of exceptio non adimpleti contractus.8 This is a simple contractual

device by which a party to a re ciprocal contract may refuse to perform shou ld

his counter-party not perform and stands therefore as a potential defence to a

claim for specic performa nce.9

The statement of the law so far is est ablished in the historical sources a s well

as in the judgments of the Appellate Division (and later the Supreme Court

of Appeal). The problem is that this bald restatement fails to take account of

all the nuances of possible factual problems which have been thrown up over

the course of history. What follows is an attempt to shed light on some of the

major problems which have faced past courts, in this country and others, in

resolving disputes involving reciprocal obligations. Once a right to withhold

performance is recognised, an immediate inquiry must take place as to

whether that retention is just ied and whether the principle of reciprocity is

served or undermined by upholding the refusal to perform. Ultimately many

of these questions involve issues of what is fair inter partes – a consideration

which has led to several glosses on the basic r ules stated above.

This article will proceed in part two to discuss the histor ical origins of the

concept of reciprocity in contr act law. From there, in part th ree, the notion of

reciprocity in the conclusion of a contrac t will be considered, again th is section

will be largely historical. Part four will give an account of the concomitant

doctrines of specic performance and exceptio non adimpleti contractus.

These concepts will be dealt with historically and comparatively, but with a

special focus on South African law. Part ve will deal with issues of reciprocity

involved when a contract is repudiated, p art six with the consequences which

reciprocity entails for par ties following the termination of a contract , whether

through breach or because it is voidable. Finally part seven will deal with t he

difcult issue of divisibilit y of obligations or performances in contract law,

while part eight will c onclude.

5 808A-B

6 ESE Financial S ervices (Pty) Ltd v Cram er1973 2 SA 805 (C) 809H-811A; BK Tooling (Edms) Bp k v

Scope Preci sion Engineering ( Edms) Bpk1979 1 SA 391 (A) 418B-C

7 BK Tooling (Edms) Bpk v Sco pe Precision Engin eering (Edms) Bpk1979 1 SA 391 (A) 418C-E

8 415H-416A

9 See the discussion of BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979 1 SA

391 (A) in part 4 3 below and for fu rther details, S v an der Merwe, LF van Huys steen, MFB Reinec ke &

GF Lubbe Contract: General Principles 3 ed (2007) 388-391; RH Chri stie & GB Bradfield The La w of

Contract in S outh Africa 6 ed (2011) 437-440

4 STELL LR 2013 1

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